Many cryptocurrencies are still struggling to find a use case in the real world, which is affecting their ability to create long-term value for investors. XRP (XRP 1.87%) doesn't have that problem, because it was designed as a bridge currency for the Ripple Payments network, which allows banks to execute instant, low-cost money transfers across borders.
XRP became one of only a few cryptocurrencies to set a new record high last year when it soared to $3.65 per token in July. However, it has plunged by 61% since then amid the broader sell-off in the crypto industry.
Although XRP's use-case should, in theory, drive long-term upside, it's facing some structural issues that might be difficult to overcome. If history is any guide, these headwinds might fuel even more downside instead. Here's where I predict the token will be trading in five years from now.
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Ripple Payments is solving a real problem, but is XRP necessary?
Sending a payment overseas through a bank can take several days, and often comes with substantial fees. This is because not every institution uses the same payment infrastructure -- some have adopted the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network, whereas others haven't, so many transfers have to go through an intermediary (middleman) which takes time and costs money.
Ripple Payments was built to facilitate direct communication between banks regardless of their existing infrastructure, allowing them to settle transactions with one another directly. This means transfers are practically instantaneous, with minimal fees.
Ripple launched XRP as a bridge currency for the network. Rather than sending U.S. dollars to a European bank, an American bank can send XRP instead, eliminating expensive foreign exchange fees. In fact, a typical XRP transfer costs just 0.00001 tokens, which is a fraction of $0.01.
CRYPTO: XRP
Key Data Points
But there are a few issues. First, using XRP isn't mandatory, because Ripple Payments also facilitates fiat currency transfers. In essence, this means the value of XRP won't necessarily increase in line with increased network activity. That's a key reason why it tends to decline sharply during sell-offs in the broader crypto markets -- its performance is still very much determined by speculative investors.
Second, banks typically don't hold onto bridge currencies, because they aren't useful outside of making transfers. In my earlier example, the American bank would be a buyer of XRP, but the European bank would be an equal seller when it converts its tokens into euros. On that note, XRP is extremely volatile, so holding onto a large number of tokens can expose banks to significant losses.
That is partly why Ripple launched its own stablecoin called Ripple USD (RLUSD +0.02%) in late 2024, which brings me to the third issue. Stablecoins offer practically zero volatility, so Ripple USD is a great choice for banks that want to use a bridge currency in their transactions, and it could, therefore, put a major dent in the demand for XRP.
Here's where XRP could be in five years
XRP is trading at $1.42 per token as I write this, which is 61% below its all-time high from last year. Prior to that, the last time XRP set a record high was in 2018 -- but it proceeded to lose more than 90% of its value within a matter of months, and it went on to trade below $1 for the bulk of the next five years.
I think a similar outcome is in progress right now. Since Ripple Payments isn't a consistent source of XRP demand, the token will have to either find a new use case, or it will continue succumbing to the whims of speculative investors who typically sell aggressively when uncertainty arises in the broader crypto markets. This definitely isn't a recipe for long-term value creation.
If we simply follow history, I think XRP will be trading at somewhere between $0.30 and $0.50 five years from now. That assumes its 2025 high remains the peak for the foreseeable future, and that the decline reaches a similar magnitude to the 2018 decline with no meaningful recovery thereafter.
